On 13 July 2023, a significant ruling was delivered in the ongoing SEC v. Ripple Labs lawsuit. The U.S. Securities and Exchange Commission (SEC) had accused Ripple Labs and its two senior executives, Bradley Garlinghouse and Christian A. Larsen, of unlawfully offering and selling securities. The case was presided over by Hon. Analisa Torres, a district judge at the United States District Court for the Southern District of New York.
The court’s decision was a mixed bag, granting and denying summary judgment motions from the SEC and Ripple. The SEC’s motion for summary judgment concerning the Institutional Sales was given but denied for other matters. Conversely, Ripple’s motion for summary judgment regarding the Programmatic Sales, the Other Distributions, and the sales made by Larsen and Garlinghouse was granted but denied concerning the Institutional Sales. The SEC’s motion for summary judgment on the aiding and abetting claim against Larsen and Garlinghouse was also denied.
A key takeaway from the ruling was the judge’s statement that XRP, as a digital token, does not in and of itself embody the Howey requirements of an investment contract, suggesting that the court does not view XRP as a security.
In the wake of this partial win for Ripple, discussions about a potential XRP exchange-traded fund (ETF) have been gaining momentum. This comes as more firms are seeking to establish Ethereum (ETH) ETFs.
As CoinDesk pointed out yesterday, in the past few days, a wave of applications for Ether (ETH) futures-based exchange-traded funds (ETFs) has hit the U.S. Securities and Exchange Commission (SEC), riding on the coattails of the recent Bitcoin spot ETF frenzy. The first to make a move was Volatility Shares with its Ether Strategy ETF application, submitted on July 28. This company had previously made headlines in June when its 2x Bitcoin Strategy ETF (BITX) became the inaugural leveraged crypto ETF available in the U.S.
By the start of August, a flurry of other companies had followed suit, filing for their own Ether Strategy ETFs. These included Bitwise, VanEck, Roundhill, and ProShares, with the latter submitting applications for both a Short Ether Strategy ETF and a standard Ether Strategy ETF. Grayscale also threw its hat into the ring with its Ethereum Futures ETF.
Despite the surge in applications, the SEC has yet to approve any ETFs tracking Ethereum futures contracts. Close to ten such applications have been submitted in the past, but none have received the green light.
Mike Selig, a former lawyer for the Commodity Futures Trading Commission (CFTC), shared his thoughts on Twitter about increasing applications for Ethereum ETFs with the U.S. Securities and Exchange Commission (SEC). Selig suggested that an ETH ETF would likely follow closely if a Bitcoin ETF is imminent. He based his argument on factors such as the Hinman speech, the SEC FinHub framework, and recent court developments.
Selig specifically pointed out that court rulings on Ripple and Terraform have strengthened the argument that Ethereum is not a security, even if it was initially sold as one.
In response to Selig’s comments, a prominent influencer in the XRP community, known as Digital Asset Investor, highlighted the potential for an XRP ETF. The influencer argued that XRP has a unique advantage over other digital assets due to its legal clarity in the United States. He suggested that XRP’s non-security status makes a strong case for an XRP ETF in the future.
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